Why the FCC Chose Not to Regulate Ethernet Bulk Data Prices

When the Federal Communications Commission unveiled a new regulation to regulate the $45 billion “business data services” market, many in the industry were surprised the rules didn’t include price caps on newer, Ethernet-based technology. A nonbinding agreement reached summer 2016 between two key players — incumbent carrier Verizon and the competitive-carrier trade group INCOMPAS — included Ethernet price caps. The goal for both the FCC and some in the industry is to curb anti-competitive pricing of the bulk data connections that power ATMs, retail transactions and cell phone towers. Most observers — including some inside the FCC itself — expected the commission’s final rule to track closely to the Verizon/INCOMPAS deal. The rule, which is actually quite different from that agreement, is currently on circulation among the five commissioners. A vote on it could come at any time, but it has not been included on the docket for the commission’s open meeting on Oct 27.

There are competing reasons why the commission excluded Ethernet price caps in the rule, apparently. The main reason is that a thorough examination of its marketplace data showed insufficient evidence that the Ethernet market was noncompetitive. Recent data revealed an uptick in Ethernet competition, driven in part by the entrance of cable companies into the bulk data marketplace. It would be premature to regulate the price at this point. Apparently, there are additional reasons, beyond the main argument about inconclusive data, that explain why the commission didn’t include Ethernet price caps in its latest version. The FCC lacked the pricing data that would make the caps capable of effectively withstanding a legal challenge. In addition, apparently some regulators were concerned by unworkable provisions in the Verizon/INCOMPAS proposal to cap Ethernet prices by census blocks. What’s more, apparently regulators were worried about industry reaction to earlier FCC orders that exempted some bulk data providers from regulation.